Big changes to Ontario’s dairy quota policy

© AgMedia Inc.


Desperation at the beginning of the end. Or perhaps the end of the beginning of the end.

To improve is to change; to be perfect is to change often.

First of all, reading this article would make the average persons head spin in utter disbelief. What other organization in Canada, yet alone this planet, gets a government granted monopoly where the ones that profit sit on the boards and write the rules willy nilly as they please.
Secondly, if the dairy farmers want to lower the price of quota, simply lower the price they pay themselves for milk. Is this hard to understand? Apparently.
And finally, with this lowering of quota to $24000, watch for the price of land to rise within a few miles of every dairy operation.

Raube Beuerman

Editor: Comment will be published if signed and resubmitted.

Yes..and no Town or City dweller would ever want to see the value of their house go up ??

Good observation. The price of houses in Ontario and the price of quota have both gone up to the point were 1st time buyers find it REALLY difficult to establish and begin a productive life of their own.

In response to "Used to be a Dairy Farmer"

You have made an interesting analogy.

Canada currently has the 2nd least affordable housing in the world (the least affordable is Belgium, likely due to EU head office effect).

IMF, OECD, consultants, Canadian banks disagree on how bad the housing bubble is, but most experts agree it's over-valued by 10%, to 30%, to 60%, to possibly as high as 90%!

When I first heard 90%, I laughed at such nonsense. Then I calculated. I bought my 100 acres of bare land in Northern Ontario in 1980 for $22,500 but it peaked in 2009 at about $300,000 in value. If there was a 90% drop when the bubble bursts, that would be a bubble deflation of $270,000 which drops my property value to $30,000 which would be comparable to 1990 prices.

I stopped laughing.

Bank of Canada cut the interest rate by 0.5% yesterday due to the weak economy (ie. we have entered another recession as of June 30). That cut will be the last party for real estate agents, and will be costly for all who buy or trade up again to a more expensive house, right at the peak of the market

On the SM side, a few days ago we say dairy quota value deflation by DFO.

Perhaps a lot more deflation will soon arrive for all Supply Management quotas, especially after TPP is signed.

All those multi-millionaire Supply Management farmers may want to quickly find themselves a "Greater Fool" who will buy their quota and SM farm before the bubble bursts.

It will need to be a very special fool. At today's prices for farm land, barns, and quota for chicken farming of about $4.6 million, the return on investment is about 2.99%. With chicken farming, you have to work. Alternatively, you can buy a GIC and have a guaranteed income that is similar, no work required.

Just how big of a passion do you think these fools have to be a chicken farmer?

The current generation of chicken farmers can't exit, and the next generation can't enter. Most of the current SM farmers will be forced to ride their investment over the soon to arrive financial cliff.

Glenn Black
Small Flock Poultry Farmers of Canada

Glenn, in order to generate a 3% return on your money in a broiler operation, you must have assumed no borrowing costs, which is highly unlikely.
Here are my numbers, 2.4 million for a barn and 14000 units of quota, and I estimate a net income before tax of about $75000 for an operation that size which would come out at 3% return as you said , but before tax.
Run the numbers assuming the money is borrowed, which it most likely is, and things look horrifying.
You compare the income to a GIC, which is Ok I guess if one cannot stomach the daily fluctuations of equities, but when considering the tax advantage of dividend income over interest income, dividends will provide about twice the amount of income, which is paid monthly or quarterly in cold hard cash.
Regardless of income type, divvy or GIC, it certainly shows how overvalued quota is.
Raube Beuerman

I response to "You're Assuming No Borrowing Costs"

I agree with you. That is why I made the comparison to investing in a risk-free GIC, similar for a "ultra low risk" Supply Management investment. If you get avian flu, you get government subsidy for partial reimbursement. For the rest, you can buy insurance for the barns.

The numbers I quoted came from the June 2010 study by FarmStart titled " New Farmers and Alternative Markets in Supply Management System, sponsored by the Metcalf Foundation." I had put in the link, but BF needed to remove it before approving the publishing of that posting on this Forum.

I agree that ETF, preferred & convertible, or common shares are likely a far greater payout, but these have significantly higher risks, especially now in the world-wide financial turmoil we are in.

The only CAFO, quota-based chicken farmers in Canada today are the ones who were given free quota, inherited it, or married it.

The average age of farmers is In 2011, I'm not sure how much active farming they're doing, but in 2011 there were 5 farmers who were 100 years old. The mode (ie. the largest number of farmers in any age category) was 58 yrs old for males, 54 yrs old for females. In 1991, those same modes were 36 yrs old for males, and 36 yrs old for females.

Therefore we calculate that the mode for males aged by 22 years between 1991 and 2011 (a 20 year span), and the mode for females aged 18 years between 1991 and 2011.

Therefore the male farmers became older by 2 additional years (ie. older farmers entered or stayed farmers, while younger ones got out), and the females became younger by 2 additional years.

Stats Canada adds "Between 1991 and 2011, the number of farms where the oldest operator was less than 40 years old declined almost 75.0% from 74,159 to 20,299 farms. These farms represented 9.9% of the total in 2011 compared to 26.5% in 1991."

This aging of farmers is a growing danger for the Canadian farming community, as well as all those who depend upon the aging farmers (ie. for food &/or jobs, etc.).

Glenn Black
Small Flock Poultry Farmers of Canada

Quota was free

Making non saleable quota, saleable, is setting the stage for a more lucrative buy out when it eventually happens.
Kevin Nixon

Supply Mgmt or Simple Minded it makes me ponder

Would it not make more sense to wait till the details of the TPP first ? Might be two sets of changes in a short time frame .

To say that no other commodity is supply managed , all u have to do is at the cab licences in the city of London were most of them were handed out by the city for $ 1. 00 . Some of those licences have sold for $150000,0 . So it does not only happen in farming.No I am not in sm , have been in the pork side for 40 yrs . Sm is a good system except for the value of qouta . We have had many years that we lost our shirt, and there is nothing cool about that . Herman Minnema

Supply Management is looking like a wounded soldier (I'm in supply management)
Dairy farm policy is to constrictive.Dairy policy should not constrict those wishing to expand to whatever size that is.Broiler and egg producers have no constrictions like this as well as other provinces in the dairy industry.These policies really limit young families from entering the dairy industry.Having to move your whole family to another part of Ontario to expand your herd is backwards policy and maybe that is why the government should look at buying out Supply Management.

Supply Management should only be price protected on the first $500. worth of production per day per location. Most urban people do NOT support the current model for chickens or laying hens. All new Quota should go to new small producers.

I'm going to set up the Baking Board of Ontario and get the government to grant me power to make my own laws. No one will be able to bake unless they buy quotas from the board. Quotas start at $500 for one week of unlimited baking. If you think this is ridiculous then why not the quota system or the Dairy Board? The Dairy Board's only purpose should be to regulate the use of growth hormones and to maintain quality. The quota system is unfair, why should others have to pay to get something that was once free, just level the playing field.

There is no "l'm" or "my" in any marketing board.

Post new comment

To prevent automated spam submissions leave this field empty.
We welcome thoughtful comments and ideas. Comments must be on topic. Cheap shots, unsubstantiated allegations, anonymous attacks or negativity directed against people and organizations will not be published. Comments are modified or deleted at the discretion of the editors. If you wish to be identified by name, which will give your opinion far more weight and provide a far greater chance of being published, leave a telephone number so that identity can be confirmed. The number will not be published.